ILC-UK’s response to the OBR’s first fiscal risk report

Date: 13 July 2017

NEWS

ILC-UK’s response to the OBR’s first fiscal risk report

Date: 13 July 2017

Jul 13, 2017 | NEWS

In response to the Office for Budget Responsibility’s first Fiscal Risk report, which found that ageing and technology cost pressures make health spending the biggest risk to fiscal sustainability, Sally-Marie Bamford, Director of Strategy and Research at the International Longevity Centre – UK (ILC-UK), the UK’s leading think tank focusing on longevity, ageing and population change said:

“Today’s OBR Fiscal Risks report shows that the ageing of our population is the greatest single risk to government spending by driving up health costs over the long run. As our recent SOS2020 report showed, we will need transformative change in the health sector in order to ensure long run sustainability, which in particular will mean getting smarter with innovation.

Within the NHS, too many funding mechanisms still do not reward or encourage innovation, with payments too often based on output and not outcome, and Clinical Commissioning Group funding regulations discouraging the bold moves needed to create long-term cost savings, whilst still maintaining high levels of quality.

As one of the largest components of age-related public spending, healthcare is at the forefront of the challenge of ageing and delivering long run productivity growth in healthcare is likely to be one, if not the, most important element in ensuring a sustainable older society.”

In the SOS2020 report we modelled future health spending scenarios and found:

Health spending as a proportion of GDP

  • In the “transformative change” scenario, health spending rises from around 6% of GDP in 2019-20 to 8% by 2064-65.
  • In the “gradual convergence” scenario, health spending rises from around 6% of GDP in 2019-20 to 11.4% by 2064-65.
  • In the “no policy change scenario”, health spending rises from around 6% of GDP in 2019-20 to 16.4% by 2064-65.

The primary balance – the difference between non interest receipts and expenditure

  • In the “transformative change scenario”, the primary balance falls from a surplus of around 2% of GDP to a deficit of 1.9%.
  • In the “gradual convergence scenario”, the primary balance falls from a surplus of around 2% of GDP to a deficit of 5.3%.
  • In the “no policy change scenario”, the primary balance falls from a surplus of around 2% of GDP to a deficit of 10.3%.

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